What are the risks of releasing funds early as requested by the regional center?

A few months ago I submitted my EB-5 application to USCIS. My EB-5 investment funds are currently being kept in an escrow account which says it will be released to the regional center only when my application is approved. Today the regional center asked if I can release the funds now for them to use immediately. Should I comply with the regional center''s request? What risks will I face with this early release of funds?

Answers

It is highly advisable that you review the project documentation to determine how the investment funds will be returned in the event of I-526 approval or I-526 denial. Your EB-5 attorney who prepared and filed your I-526 should be able to advise you on that, or you may retain another attorney for consultation before releasing funds.

The risk of granting an early release of funds from the escrow account may expose you, the investor, to the potential loss of gaining U.S. permanent resident status if your I-526 petition were denied by the USCIS. Whether the I-526 petition were denied or not, you would retain the financial benefits of your investment. To decide if you will sign an early release of your funds, you need to weigh the necessity that the regional center use the funds immediately for maximum gain on your investment against the potential risk of losing an opportunity to obtain U.S. permanent resident status.

The risk to releasing funds early is that if your I-526 petition is denied, the regional center may not be able to refund your investment amount, or there may be a delay in receiving your refund. Your funds will be tied up in the project at that point and it might be difficult to get them out. On the other hand, if the regional center already has a certain number of I-526 petition approvals in the exact same project, then as long as your source of funds documents are sufficient, your I-526 petition likely will be approved. You should check with your immigration counsel, who can advise you on this matter. Many EB-5 projects need to use the funds earlier, and waiting 14 months or longer for the USCIS to adjudicate the I-526 petition before the project can access the funds creates a financial hardship on the project. That is why many regional centers have a "trigger" for early release of escrowed funds

Some regional centers will, in their offering documents, state that funds can or may be released before I-526 approval, or even before filing. Some may make requests like these and care should be taken with the assistance of immigration and securities law counsel. Be careful of maintaining your capital investment and sustained investment requirements throughout the entire period of conditional residency.

Risks as to your investment will occur whether the investment funds are released before or at the time of the petition I-526 being approved. With the assistance of your EB-5 immigration attorney and securities attorney, the EB-5 regional center must comply with the securities offering documents and the escrow agreement in respect to the early release.

This is too serious of a question to be answered without more information. You should consult an independent securities attorney and your immigration attorney. One of my concerns as an immigration attorney would be whether your project will be in risk of not creating the necessary job creation amounts that were forecast.

Without going into the nitty gritty, the biggest risk of releasing funds prior to the I-526 approval is the prospect of regional center failure. To hold back the fund release to the regional center is in the EB-5 investor''s best interest. However, from the regional center''s perspective, not being able to tap into the fund may create cash flow problems, especially when bridge financing becomes unavailable. Here, if most EB-5 investors in your project decide against an early release of his/her fund, the entire project could be stalled or even fail. A sensible solution seems to carefully evaluate the extent of cash flow problem the regional center now faces and its implications, then decide what to do with your money.

From the USCIS perspective, the early release actually will be helpful because your money is fully at risk as required in the EB-5 regulations. From the safety of your investment perspective, however, if this is a new, untested regional center with this being their first project, then you could be nervous about the possibility of not getting your money back even if your I-526 is denied.

There are numerous risks that are associated, with the major one being if your I-526 is denied, will they have the money available to pay you back. Evaluate the risks before making this decision, although it is becoming more and more common to release the funds before approval.

You need to have your attorney review the legal documents carefully to answer this question and make sure your funds will be returned if the I-526 is not approved. If you release early, does the regional center have the funds to repay should your case not be approved; that would be my concern.

Until further review/analysis of what the regional center/project provides for safety of your investment upon early release, the risks of doing early release is vested in the investor (money risks). However, more projects are asking for early release now because the project needs to have money to start development and cannot wait for EB-5 lengthy adjudication (14 months now).

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